TAILIEUCHUNG - Stock Market Wizards Part 3

Against the Current. Imagine two swimmers a mile apart on a river who decide to have a race, each swimming to the other's starting point. There is a strong current. The swimmer heading downstream wins. Is she the better swimmer? Obviously this is a nonsensical question. | DANA GALANT past few years we were able to make money on the short side because the company had become very overpriced on overly optimistic expectations that its business would grow robustly forever. Although Galante is a 100 percent short seller her ideas are still relevant to the long-only investor. Galante s methodology can be very useful as a guideline for which stocks to avoid or liquidate. The combination of factors Galante cites include very high P E ratio a catalyst that will make the stock vulnerable over the near term an uptrend that has stalled or reversed All three of these conditions must be met. Investors might consider periodically reviewing their portfolios and replacing any stocks that meet all three of the above conditions with other stocks. By doing so investors could reduce the risk in their portfolios. In addition Galante cites a number of red flags that attract her attention to stocks as potential short candidates. By implication any of these conditions would be a good reason for investors who own the stock to seriously consider liquidating their position. These red flags include high receivables change in accountants high turnover in chief financial officers a company blaming short sellers for their stock s decline a company completely changing their core business to take advantage of a prevailing hot trend MARK D. COOK Harvesting S P Profits Mark D. Cook drives his pickup truck off the road up the hill overlooking his father s farm on the outskirts of East Sparta Ohio. The weather is unseasonably warm and feels very much like a day in late spring but it is still late winter. The rolling fields stretch out before us in various shades of brown. I wanted you to see this Cook says. When it greens up in spring there is no more beautiful sight in the world. I paint the scene in my mind and visualize easily enough how it could appear quite pleasant with the renewal of spring. But to see this landscape with the sense of majesty implied by Cook s .

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